Annual Report 2000
Year ended March 31, 2000

N I S S H I N B O Industries, Inc. (the “Company”)
was founded in 1907 as a manufacturer of cotton yarns
and threads, and quickly assumed a position ofl e a d e r s h i p i n t h e i n d u s t r y. O u r h i s t o r y h a s b e e ncharacterized by strateg ic moves taken in advance ofcompetitors and designed to raisep r o d u c t i v i t y, i m p r o v e q u a l i t y a n d a d d v a l u e .
To d a y, w e a r e a t o t a l t e x t i l e s m a n u f a c t u r e r,controlling operations from spinning tofinishing. This, together with oura c c u m u l a t e d h i g h l e v e l s o f t e c h n o l o g y,
gives us an advantage in thedevelopment of truly distinctive
products and in qualit y control. Through the applicationin other fields of technologies and expertise originallydeveloped in the textiles area, we have diversified ouroperations into the manufacture of automobile brakes,papers, machine tools, chemical products, and others.
T h e s e n o n - t e x t i l e l i n e s h a v e g r o w n s t e a d i l y, a n d n o w
a c c o u n t f o r o v e r 6 0 % o f c o n s o l i d a t e d n e t s a l e s . We h a v etargeted cer tain strategic products to form the basis of
future g row th: High value-added finishing processing
and products in the textiles field, including SUPER SOFT
a n d S S P ( S U P E R S O F T P E AC H P H A S E ) , n e x t - g e n e r a t i o nelectronic braking systems,
high heat-insulation panels
and fuel batter y-relatedmaterials.
The Company and its consolidated subsidiar ies anda f f i l i a t e s ( t o g e t h e r, “ Ni s s h i n b o” ) a r e a l l f u l l y f o c u s e d o nsteady business development through the har nessing of
our collective strengths across our entire business range.

C O N T E N T S
Financial Highlights

Business LineupThe Power to Change,
The Passion for QualityInterview withthe ManagementSpecial Features



NISSHINBO Group

Review of Operations

Financial Review



Six-Year SummaryFinancial Section

Board of Directors



Corporate Data

Organization Chart

The paper used for this Annual
Report is from Nisshinbo’s
FLEUVE series of fine papers.
In this annual report, statements
other than historical facts areforward-looking statements thatreflect our plans and expectations.
These forward-looking statements
involve risks, uncertainties andother factors that may cause ouractual results and achievements
to differ materially from thoseanticipated in these statements.

F INANCIAL H IGHLIGHTS( Y e a r se n d e d

3 1 s tM a r c h )Consolidated:(millions ofUS dollars)(millions of yen)

1999

Net Sales
Net Income
Shareholders’ Equity¥ 226,800
4,161
200,779

2000¥ 227,452
2,648
200,1262000$ 2,166
251,906

Per Share:(Yen)

Net Income
Shareholders’ Equity
Cash Dividends

¥

17.60
843.177.00¥(US dollars)

11.36
881.01
7.00

$0.11
8.39
0.07

Note: The United States dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥105=US$1.

Net Sales(Billions of yen)

Net Income(Billions of yen)

Shareholders’Equity(Billions of yen)B USINESS L INEUPTEXTILES

Textile products have been our mainstay since our foundation. Our products are distinguished by their qualityand competitiveness. We have the top share in domestic markets for shirt materials (around 40%), textile sheets
for bedding (around 35%), denim (around 40%), Tetron and cotton blended uniform materials (around 35%),and spandex for total-support panty hose (more than 50%). Our state-of-the-art production facilities andunique, comprehensive in-house production system, which includes the finishing process, allow themanufacture of products that overseas makers cannot match for quality. An ability to meet the precise needs ofcustomers is our particular strong point. Our original textile products include MOBILON spandex and OIKOS
non-woven cotton fabrics. The SUPER SOFT, SSP and CELTOPIA finishing processes are also original.

NON-TEXTILESA UTOMOBILE B RAKESWe are one of Japan’s leading makers of automobile brakes and friction materials, and this sector has animportant role in our drive to diversification. Our product development emphasis is on high-performance,environment-friendly friction materials, new concept drum brakes, Anti-lock Brake Systems (ABS) and Stability
Control Systems. In the ABS field, we successfully developed the original, compact, low-cost NT series, which istargeted at markets worldwide. Stability Control Systems make it easier for the driver to control movement of thecar and thus enhance safety, and we have developed such a system.
In parallel with the development of our own technologies, we establish joint ventures, exchange technologies
and collaborate with major overseas brake manufacturers.

Consolidated Sales
Composition (%)

’98

’99

2000

Sales by Segment
in Fiscal 2000 (%)■ Textiles

36.8■ Automobile Brakes

21.7■ Papers

12.2■ Other Products

27.7■ Real Estate

1.6

P APERS
We manufacture a wide range of paper products. These include household papers, such as tissue paper, toilet
paper and kitchen-use paper towels, fine papers used in printing, publications and packaging, and syntheticpapers. Our value-added products include VENT NOUVEAU and FLEUVE natural-feel fine papers for highquality printing and synthetic papers for ink-jet printing.
We are also involved in label printing and the manufacture of label printers. Our product lineup in this field
includes small-size, high-speed printers and integration software for information processing and printing.

O THER P RODUCTS
Machine Tools
We are an acknowledged specialist in the manufacture and sale of customized machine tools and CNC turretpunch presses, laser cutting machines and press brakes. We develop and manufacture modular units for FMS
and CNC hardware/software systems for the automotive, electronics and aerospace industries. We are now
marketing machine tools through three sales channels overseas as well as in Japan.

Chemical Products
We produce rigid-type polyurethane foams for application as heat-insulation material, and flexible types used ascushion material. Processed products include AIRLITE-FRU, a lightweight, high-strength, corrosion-resistantglass fiber-reinforced polyurethane foam widely used in the water treatment and construction industries, andSETFOAM for civil engineering applications. We are also a pioneer in the introduction of environment-friendly
non-fluorocarbon polyurethane foam for application as heat-insulation material in the construction field. Ouroriginal polyurethane elastomer MOBILON is used in various industrial products and consumer items. In
addition, we offer new carbon products for application in semiconductor production and other electronics fields.
Other materials include CARBODILITE and electromagnetic wave shield materials and molded METTONTM
products produced and marketed by Nisshinbo. We also produce cross-flow fans for air conditioners for theSoutheast Asian and other markets.

OthersWe develop and supply the production systems which integrate the CHOSHOKU SENKA fuzzy logic computer
color matching (CCM) system, automatic dispensing system, manufacturing process support system andautomatic inspection system, all based on original technologies. We also produce electronics products such as
wireless communication terminals.

R EAL E STATE
We conduct real estate business to utilize efficiently land that otherwise would be vacant. We lease an officebuilding on the site of our former headquarters, and lease land previously occupied by factory facilities for use as
shopping centers and model houses.

I NTERVIEWW I T H

T H E

Q1.

Q2. How do you see your future business

What were Nisshinbo Industries, Inc.’s
consolidated results for fiscal 2000, ended March 31,2000?
Let me first announce that there has been a change in the Company’smanagement. In June 2000, Mr. Akihiro Mochizuki, former president, wasappointed chairman of the board, and Mr. Yoshikazu Sashida, former
executive director, assumed the office of president. During his term, Mr.
Mochizuki demonstrated strong leadership under extremely difficult
business conditions and made a significant contribution to laying thefoundations for Nisshinbo’s future growth.
Consolidated net sales of Nisshinbo Industries,
Inc. for fiscal 2000 amounted to ¥227,452 million(US$2,166 million), an increase of 0.3% over fiscal
1999, ended March 31, 1999. Operating income
was ¥4,140 million (US$39 million), an increase of¥3,767 million over fiscal 1999 due mainly to arecovery in profitability of textiles, automobile
brakes and papers. Loss on the liquidation ofNisshinbo California Inc. (NCI), together with adecrease of gain on securities, produced a 36.4%
decrease in net income to ¥2,648 million (US$25million).
By business segment, sales of textiles decreased
7.1% to ¥83,804 million (US$798 million), whilesales of non-textiles increased 5.2% to ¥143,648million (US$1,368 million). The ratio of nontextiles sales to total sales
was 63.2%, up 3.0
percentage points.
During fiscal 2000, theJapanese economy veered
between periods of low
growth and continued depression. Despite further massive pump-priming
measures by the government, a reduction in concerns about the health ofthe country’s financial institutions, and signs of renewed vigor in someindustries, stagnant consumer spending and corporate capital investment
prevented any sustained growth of the economy.
Sales in the textiles segment suffered from consumers’ reluctance to spend.
Segment results were also adversely affected by the liquidation of NCI.
However, cost-down activities in both procurement of raw materials andoperations led to increased profit. The non-textiles segment performed welloverall, registering increases in sales and operating income.

M ANAGEMENT

prospects?
Although economic conditions will remain difficult, the rapid growth ofseveral industries, particularly the information technology (IT) industry,has begun to generate a number of business opportunities. Over the next
few years, the increasingly “borderless” nature of the global economy,
progress in deregulation, and advances in IT will effect a rapid andfundamental change in the country’s industrial structure.
For several years, while frankly struggling in a very difficult businessenvironment, we have made strong efforts toestablish a firm foundation for Nisshinbo’s
future growth. We have sharpened our focus on
customer satisfaction and emphasized rapid
response in what is a fast-changing environment.
We are now in a much better position to respondto market and other changes more quickly andmore flexibly. In fiscal 2001, we have begun athree-year management plan designed to put usamong the top players in a fast-developing
marketplace. In the past, our medium-term
management plans usually spanned five years;
from now on, we will adopt three-year plans inorder to allow more rapid adjustments.
We will continue to create products based on
prognoses of customer demands and, avoiding
any complacency arising from our businessperformance and market shares in the past, seek
Akihiro Mochizuki, Chairman(left) and Yoshikazu Sashida,to retain a position of leadership in the market.
President

Q3. Can you give us an outline of your new
three-year management plan?
Our ultimate aim is to increase our corporate value by expanding ourbusiness scale and improving profitability. Specifically, we will work to
reinforce our capabilities to develop new products, establish a soundoperating system for each product sector, and adjust our business structure
to global standards. Within these basic themes, we will develop divisional
strategies and plans to improve management efficiency and make better use
of management resources. In all these efforts, we will utilize advanced IT toensure maximum efficiency.
By the end of the current three-year management plan (fiscal 2003), weplan to have increased consolidated sales to the ¥300,000 million level, andoperating income to the ¥13,000 million level. In the fast-growing nontextiles segment, we are looking to create a diverse range of core businesses
and raise the ratio of non-textiles sales to total sales to 70%.

In order to accomplish these goals, it is important to enhance our groupstrengths. We plan to improve the management capabilities of eachsubsidiary and affiliate and promote business restructuring based on thecharacteristics of each business field. With a view to improving our global
business development capability and competitiveness, we remain open tothe establishment of close ties with major companies in each industry.

Q4. What are the divisional targets?
In the textiles segment, our plans include reform of our profit-making
structure through an integration of manufacturing and sales operations,rationalization of our domestic production facilities, strategic developmentof overseas business operations centered on our production base inIndonesia, maintenance of our competitive edge in the domestic market bymaking optimum capital investments, and promotion of high value-addedproducts.
In the non-textiles segment, we are strengthening our business base in thefield of automobile brakes by establishing tie-ups with overseas
manufacturers. In the papers field we intend to improve profitability byconcentrating on environment-friendly and information-related products.
In the chemical products field, which has strong growth potential, we haveidentified carbon products and high heat-insulation panels as our next
business pillars, and will promote these businesses through theestablishment of stronger ties among group companies and enhancement ofproduction facilities. In addition, we will accelerate the commercializationof products in the fields of biotechnology and high-function fine chemicalmaterials, place increased focus on the electronics field, and introduce
energy and environment-related product lines such as secondary batteries,solar batteries and fuel battery-related materials. In the real estate field, wewill expand leasing of our unused land and promote the creation of valueadded business lines.

Q5. What measures are you going to take to

In terms of personnel management, we will introduce a new, performancebased evaluation system, taking into consideration recent changes in
employment practices in Japan. As a first step, we will operate a two-year
experimental system under which the amount of bonus is determined inproportion to increases or decreases in operating income.

Q6. How will you proceed with efficient
allocation of management resources?
On a non-consolidated basis, we have already developed a concrete plan.
This includes a ¥2,000 million increase in capital investment over the next
three years compared with the total for the previous three, bringing it up to¥34,000 million. Of this amount, ¥15,000 million will be allocated to thedevelopment of new products and enhancement of production facilities. We
will make significant investments in fast-growing business fields, such as
chemical and paper products.
Our annual R&D expenditure will exceed ¥7,000 million. We will invest anadditional ¥2,000 million in our new R&D Center in order to ensure thatfacilities and staff training are the very best. This will allow the R&D Center
to become the key base for the development of new businesses.

Q7. What is your policy regarding dividends?
Our basic policy is to return profits to shareholders, ideally by increasing
dividends in line with earnings. We must also make judgements about thelevels of retained earnings necessary to secure future growth.
Owing to the adverse business environment, our results for fiscal 2000
were not as we had hoped. Nevertheless, we have retained the per share
dividend for fiscal 2000 at ¥7.00 (US$0.07), the same as for fiscal 1999.
During fiscal 2000, we bought back a total of nine million shares of theCompany for an amount of ¥4,575 million and cancelled them. The purpose
was to improve shareholders’ value.

improve management efficiency?
First, we will adjust our business structure in order to operate in accordancewith global standards. This includes changing our accounting standards tobring them in line with international standards. In order to achieve a level ofreturn on assets appropriate for a company operating on a global basis, wewill reconfigure the composition of total assets and reduce interest-bearingdebt. We will also implement more sophisticated investor and public
relations programs.
Another important task is to fulfill our responsibilities relating toprotection of the environment. We will adhere rigidly to the action policies
laid down in the “Nisshinbo Environment Charter” announced in April
2000. Four of our plants have obtained ISO14001 certification, and wecontinue to seek such certification for all our plants and offices.

Akihiro Mochizuki
Chairman

Yoshikazu Sashida
President